BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: SCA 7 Hearing Date: 1/12/2016 ----------------------------------------------------------------- |Author: |Huff | |----------+------------------------------------------------------| |Version: |5/28/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Randy Chinn | |: | | ----------------------------------------------------------------- SUBJECT: Motor vehicle fees and taxes: restriction on expenditures DIGEST: This constitutional amendment (SCA) proposes to amend the California Constitution to: 1)Prohibit the Legislature from borrowing revenues from fees and taxes imposed on vehicles or their use or operation, and from using those revenues other than as specifically permitted in the Constitution, with limited exceptions. 2)Prohibit revenues derived from motor vehicle taxes, motor vehicle fees and taxes, and vehicle license fees (VLFs) from paying the principal and interest on bonds or other indebtedness, except as explicitly provided. 3)Require that revenues derived from the portion of the VLF that exceeds the current rate of 0.65% be used solely for street and highway purposes. ANALYSIS: Existing law: The California Constitution: 1)Restricts the use of fuel excise tax revenues (from vehicles used on public streets and highways) and vehicle registration fee revenues to transportation purposes. SCA 7 (Huff) Page 2 of ? 2)Restricts the Legislature from borrowing revenues from the Highway Users Tax Account. 3)Restricts fuel excise tax revenues to development and construction of roads and highways, unless a majority of voters in an election throughout a county or counties approves the use of the revenues for fixed-guideway mass transit. 4)Allows the Legislature to pledge fuel excise tax revenues for payment of bonds to fund voter-approved fixed-guideway mass transit projects. 5)Allows the Legislature to use up to 25% of the state's share of fuel excise tax revenues for payment of state-issued, voter-approved bonds for transportation purposes issued after November 2010. 6)Allows a city or county to use up to 25% of its share of fuel excise tax revenues for payment of locally issued, voter-approved bonds for transportation purposes. 7)Specifies that the restrictions on fuel excise tax and vehicle registration fee revenues do not apply to revenues derived from sales taxes or VLFs. This SCA: 1)Restricts the Legislature from borrowing revenues from any of the following taxes: a) Fuel excise taxes (from both on and off public roads and highways) b) Vehicle fees and taxes (such as vehicle registration fees and weight fees) c) VLFs above the existing rate of 0.65% of the market value of the vehicle 1)Eliminates the authority of the Legislature or local governments to pledge fuel excise tax revenues for payment of bonds to fund road construction and repair as well as voter-approved fixed-guideway mass transit projects. 2)Restricts the use of revenues from any fuel excise tax, vehicle fee or tax, or VLF above the existing rate for the SCA 7 (Huff) Page 3 of ? payment of bond indebtedness, except as provided in existing law. 3)Dedicates any revenues from increases in the VLF above the existing rate to transportation purposes. COMMENTS: 1)Purpose. According to the author, since 2010, the Legislature has diverted over $5 billion from the State Highway Account to the General Fund to pay debt service on General Obligation Bonds. Additionally, since 2012, $100 million per year in gas taxes has been deposited into the General Fund rather than being used for transportation purposes. This SCA asks the voters to protect transportation taxes by requiring that they be used only for transportation purposes and preventing those revenues from paying for transportation bonds. 2)Background of transportation maintenance backlog. California faces an enormous road and highway maintenance backlog. The Governor, in his 2015 inaugural address, noted that the state faces a $59 billion shortfall over the next 10 years to adequately maintain the existing state highway system. Local governments have estimated the funding shortfall for maintaining existing local streets, highways and bridges is $78 billion over the same time period. Efforts to develop solutions have been ongoing, including the establishment of the current First Extraordinary session. 3)Current restrictions. Most transportation revenues, including gasoline and diesel excise taxes and vehicle registration fees, are constitutionally protected from being borrowed or used for purposes other than transportation. This protection does not apply to VLFs and fuel excise taxes for usage outside of public roads. 4)General Fund impact: weight fees. Weight fees are assessed on commercial vehicles based on weight. Those revenues are protected by the Constitution and are currently used to pay the principal and interest on transportation bonds, resulting in a savings to the General Fund of $1 billion annually. The author disagrees with that practice, believing that those transportation bonds should be paid out of the General Fund, with the weight fees funding other new and ongoing transportation projects. This SCA prohibits the practice of SCA 7 (Huff) Page 4 of ? paying for the transportation bonds with weight fee revenue, resulting in the loss of the General Fund savings. 5)Additional restrictions: vehicle license fee. This SCA proposes a comprehensive set of protections against borrowing taxes and fees raised from fuel excise taxes, vehicle fees and taxes, and VLFs above the existing rate of 0.65%. It also proposes to dedicate any revenues from increases in the VLF above the existing rate, and any fuel excise taxes on fuel not used on public roads and highways, to transportation purposes. The VLF is a property tax and therefore not subject to the same constitutional restrictions as taxes on motor vehicle fuels or the use of motor vehicles. Most VLF revenues are used for local government purposes. The proposals being discussed in the First Extraordinary Session do not include a VLF increase. 6)Non-public road uses: author's amendment. Motor vehicle fuel is sometimes used by vehicles that do not use public roads, such as boats, airplanes, and off-road vehicles. Taxes from the use of these fuels are used to support the infrastructure and purposes those vehicles are put to, such as harbors, airports and off-highway vehicle parks. The author will propose amendments to clarify that the SCA does not change the current use of these funds. 7)Double-referral. If approved, this bill has also been referred to the Senate Elections and Constitutional Amendments Committee. Related Legislation: SCAX1 1 (Huff) -This SCA is nearly identical to SCA 7 and was approved unanimously by the Senate Transportation and Infrastructure Development Committee, though with caveats by a number of Senators. This SCA is pending in the Appropriations Committee. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, January 6, 2016.) SCA 7 (Huff) Page 5 of ? SUPPORT: Alameda Corridor - East Construction Authority California Association of Harbor Masters and Port Captains California Yacht Brokers Association County of Riverside Howard Jarvis Taxpayers Association Kern County Board of Supervisors Madera County Board of Supervisors Marina Recreation Association National Marine Manufacturers Association Orange County Taxpayers Association San Bernardino County San Joaquin Valley Regional Transportation Agencies Transportation Agency for Monterey County Worldwide Boaters Safety Group OPPOSITION: None received -- END --